Question

Define and explain tax credits and tax deductions and give at least 4 examples of for...

Define and explain tax credits and tax deductions and give at least 4 examples of for each.

Homework Answers

Answer #1

Tax Deduction is an amount which is available to a taxpayer to be deducted from Income.

Examples:-

  1. Standard Deduction
  2. Itemized Deduction – Property Tax, Real Estate Tax etc.
  3. Student Loan Interest
  4. Medical and Dental Expense

Tax Credit is an amount which is available to a taxpayer to be deducted from Tax Payable. Tax credits are deducted directly from Tax Payable while Tax Deductions are deducted from Income.

Examples:-         

  1. Child and Dependent Care Credit
  2. Credit for the Elderly or disabled.
  3. Foreign Tax Credit
  4. Health Coverage Tax Credit
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